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Love New Zealand: Fiscal Plan speech by James Shaw - 18 September 2017

James presented the Green Party's fiscal plan for the 2017 election on 18 September 2017 at Biz Dojo, Wellington.

Tena koutou katoa.

Thank you so much for joining us here today, online or in the room.

I am unreasonably excited about this event and the document that we’re launching tonight.

Because what we’re doing is bringing together every policy proposal and plan that the Green Party has offered to the country, about how to make the promise of 100% Pure New Zealand a reality, into one place.

And, because we’ve costed everything out and had it externally audited and verified, we’re showing that that promise of a 100% Pure NZ is, actually, 100% Possible.


I did an interview last week with Guyon Espiner on Morning Report and first question, 7.30am on a Thursday, he asked me: what do the Greens stand for.

I said the Green Party stands for long term thinking. We stand for the future.

We stand for different ways of doing things to meet the different challenges that are coming down the line.

Like you do.

If you’re watching this, or if you’re in this room, you’re probably interested in long term thinking too.

Because you are the social entrepreneurs, the NGOs advocating for better public policy, the innovators and inventors, the people running start-ups that are going to change the world and the businesspeople working out how to create more jobs and improve the lot of New Zealand Inc.

The work you do spans well beyond the three-year cycle that we Parliamentarians live by.

And that’s why I think the Greens are such an important voice in Parliament, because our orientation has always been about the big, long-term, even inter-generational challenges that we face.

Our priorities are climate change, clean rivers, and ending poverty.

None of those are problems than can be solved tomorrow. They will all take time. And if we don’t start soon, they will take more time.

My comms people hate this.

It is much easier to market a new road than it is to market a zero carbon economy.

But we do it anyway, because it’s who we are and it’s what has to be done.

[slide – onion]

There’s a story I like that sums up a lot of what I think is wrong with a lot of politics and policy in New Zealand.  It comes from the Italian writer Primo Levi.

Levi trained as a chemist, and in one of his essays he talks about an experience he had working as an industrial chemist in the 1940s.

This factory had a protocol for making varnish and half-way through this protocol it told them to add slices of raw onion to the vat.

And after five years of doing this Levi asked his predecessor, who was retired, why am I adding onions to this varnish?

And this retired chemist explained that when he first started making the varnish sixty years earlier he didn’t have modern thermometers, so the easiest way for him to test the temperature of his vats was to put onions in them and see if they fried.

And even though the technique had been obsolete for decades, everyone kept doing it because that was how it had always been done.

When I was working at PriceWaterHouseCoopers in London one of the retired partners told me a similar story.

He was a consultant for a US car company in the 1970s and they were getting hit by the first wave of competition from the Japanese automotive industry.

So they had a close look at their design process, and they found that their engines still had components in them dating back to when they manufactured hand-cranked models forty years earlier.

They’d been obsolete for decades, but everyone still put them in there, because that’s what they’d always done.

We live in a world of constant change but there’s this inertia, especially in our politics, where we all keep doing what we’ve always done.

Even if it doesn’t work. Even if it’s making things worse.

The Greens started our campaign this year talking about poverty.

That conversation’s had its ups and downs but we have had some success.

The National and Labour leaders have both committed to reducing child poverty in the next term of Parliament.

So that’s something.

But they’re both still operating in that business as normal mind-set without acknowledging that our country has changed in very fundamental ways.

[slide – unemployment graph]

Here’s our unemployment rate for the last sixty years.

It’s an economic history of modern New Zealand in one line.

This flat section here is an unemployment rate of less than one percent for over ten years.

The start of the line is the late nineteen fifties, but that line actually stays like that off the screen, way back into the mid-1940s, the post-war era.

Then over here you have Muldoon. Rogernomics. Ruth Richardson. Where the unemployment rate peaked at over ten percent.

One in ten workers unemployed.

For the last seventeen years, the line has averaged five percent. That’s the new normal. One in twenty workers. It used to be one in a hundred.

What’s the difference between the start of the line and today?

We had good economic conditions back then, just like we do today.

The big difference is that back then, the government created jobs.

New Zealand Forestry. New Zealand Rail. Public Works.

All those industries that got sold off and asset stripped in the 1980s and 1990s.

You actually have a very generous welfare state back here. The average benefit was just under forty percent of the average wage.

Now it’s just over twenty percent.

There was a very strong safety net. But there were jobs so not many people used it.

Here’s what happens when the jobs vanish.

[slide – beneficiaries]

The welfare system, which is designed to be a generous safety net compatible with a society in which there are plenty of jobs, doubles in size, and then just keeps on doubling.

Here in the early 1990s you’ve got Treasury and Ruth Richardson saying “Obviously this is unaffordable, so we’ve got to make it impossible to survive on welfare because that will incentivise people back into work.”

That didn’t work, the number of beneficiaries kept going up, and it only went down when the labour market recovered in the late 90s and early 2000s.

Again, 5 percent has become a new normal.

But it’s a situation that is historically very abnormal.

And here’s what happens when you have a large section of the population move from secure work to insecure work, and the welfare system, and then you reduce welfare payments.

[slide – child poverty]

Child poverty more than doubles.

When you’re looking at charts and statistics it’s easy to forget how much human suffering lies behind these numbers.

You’re talking about overcrowding, homelessness, preventable deaths from third world diseases.

You’re talking about twenty deaths and thirty thousand child hospitalisations each year because of housing related illnesses.

And the situation is actually worse than it looks, because many children living in poverty are children younger than three.

Most households in contemporary New Zealand need two incomes to pay a mortgage or rent.

You have a child, one of those incomes drops away, often only for a few months, and that child and the rest of the family are living in poverty.

All of the child development experts and paediatricians tell us that those first three years are the most vital in a child’s life for their neural development, which goes on to affect all of their life outcomes.

They call them the first thousand days.

And more and more New Zealand children are spending their first thousand days in poverty with poor nutrition, suffering from housing-related illness.

Now, a lot of people say that the Green Party shouldn’t talk about this stuff.

We should stick to being an environmental party and not worry our pretty little heads about issues like this, or the tax system, or the economy.

I have two answers to that.

The first is that if we don’t talk about this: no political party talks about it. Because we talk about it, the rest of them have to.

But we don’t just talk.

We have a plan that, when put into place, would be the most fundamental reform to the tax and welfare system in a generation.

By raising core benefits 20 percent and fixing Working for Families, lowering income tax at the bottom of the scale and raising it at the top, and raising the minimum wage. Our plan could lift every child in this country out of poverty.

The cost is about $2 billion.

Given where the country is at right now, that is actually easily affordable, and we have the independently costed plan to prove it.

The bit of this plan that’s actually the most revolutionary, however, is about changing the welfare system to provide what is essentially a guaranteed minimum income.

By changing the abatement rates – the amount someone can earn before their benefit or Working for Families is cut – we can modernise the welfare system for the age of precarious work.

No one should have their family support cut because their boss offers them an extra shift or a few more hours.

It is a waste of everyone’s time if people on income support have to constantly report back to WINZ that last week they worked 9 hours, this week it’ll be 15, and next week it’ll probably be only 5.

That is the reality of many jobs in 2017 and we need a social safety net that reflects that reality.

If the long term goal is to encourage people back into work, the current system doesn’t make sense because it actually disincentivises people to take more hours.

We will fix that.

The second reason the Green Party should talk about poverty and economic fairness is that these issues are all linked.

Poverty is linked to housing, and it’s linked to the environment. Let me show you how.

[slide – John Key’s house]

This is John Key’s house in Parnell which he purchased back in 2002 and sold two weeks ago for twenty million dollars.

According to the New Zealand Herald, Key’s house increased in value by one point eight million dollars a year during the time he owned it.

That is all tax free income.

The median income in New Zealand is about forty eight thousand dollars a year. And everyone who earns money via an income pays tax on it.

So Key’s house earned about forty times as much as the average income, tax free.

Now if you have a couple of million dollars to invest are you going to start a business, create jobs, get that unemployment rate lower and pay company tax at 28%?

Or are you going to make millions a year tax free in the property market?

Most people choose the property market, which is why the wealth tied up in New Zealand property is worth about $1.1trillion dollars while our share market’s market capitalisation is less than a third of that.

It’s also why our productivity growth is low. It’s why our salaries are low, and why our housing costs are astronomical.

This is the other huge driver of poverty in New Zealand and all the problems that flow on from that poverty.

There’s a direct link between the people who live in these houses, and the kids who are dying of rheumatic fever in damp, overcrowded houses or living in cars, and it’s that tax loophole.

So yes, the Green Party would still like to see a comprehensive capital gains tax on everything except the family home, as one of the key components of addressing the housing crisis.


There have been three huge changes to the New Zealand economy during my lifetime.

That shift to a higher unemployment, low wage labour market.

The housing crisis.

And the dairy bubble.

[slide – cows]

This is an iconic image for me.

It shows cows belonging to Dame Sian Elias, the Chief Justice of our Supreme Court, standing in a lake bordering a Department of Conservation campsite.

This is the other broken part of the New Zealand economy.

In the last thirty years, we’ve transitioned to an intensive dairy-based economy which is killing our rivers and waterways and threatening our native species, and we don’t have any kind of regulation or tax or enforcement to mitigate or offset or prevent all of that catastrophic environmental damage because . . . We just don’t.

Because we didn’t in the past.

We’re going to fix that too.

We are going to put a levy on nitrate pollution, and a tax on greenhouse gas emissions.

If people are poisoning our rivers or contributing to climate change, then they need to start meeting the cost of that, or, ideally, change the way they do business to avoid the cost.

Our plan to clean up rivers does what no other party is promising – it actually tackles pollution at the source. That’s the nitrate levy.

And all the revenue raised, about $130 million a year, goes straight back into the farming sector through a fund that supports practical on-farm improvements, and another fund that supports big-picture changes to the way we do farming.

[slide – tree]

This is a tree.

We want to plant about 1.2 billion of them.

(Hugging them will be optional.)

That’s how we get to a carbon neutral economy. It’s also how we get to lower unemployment.

Because someone’s going to need to plant all of those trees.

Most of those jobs will be in the regions where unemployment is higher, and where housing costs are lower.

And this is also how we get cleaner rivers, because many of those trees will be in riparian zones or erosion-prone hill country.

They prevent erosion and run-off into our water-ways.

We’ll pay for these trees with a carbon tax, replacing the Emissions Trading Scheme.

Any surplus revenue will go back to every adult New Zealander in the form of an annual dividend. About $250 each.

So that’s why we talk about poverty and tax and the economy alongside climate change and the environment.

The problems and the solutions are bound up with each other.

The way most political parties develop policy is they get together a couple of focus groups and ask everyone ‘What are you mad about?’ or ‘Which of these ideas do you like most?’ and you pick the most popular and there’s your policy platform.

The Greens don’t do that.

It would make things easier for us if we did, but it would make things worse for everyone else.

Because the only way you get these issues out in front of the public and make progress on them is by talking about things that are difficult and that don’t test well in focus groups.

The final question is: does all of this add up? Can we make it work?

We’re releasing our fiscals tonight, I’ve printed out a special copy for Steven Joyce, and the answer is:

[slide – Winston/”yes”]

We’ve had our fiscals independently costed by Infometrics, using the Treasury’s Fiscal Strategy Model.

They’ve confirmed that we can achieve all of our priorities this election while meeting all of our Budget Responsibility Rules.

You might remember back in March, Grant Robertson and I stood on a stage together and committed to a joint fiscal framework.

I spoke back then of the Green Party’s vision for changing our economy, our environment, and our society.

Since we announced that framework, our respective parties have announced their respective plans and visions.

They are different, in some ways.

But both of our parties are still committed to that framework, and when I sit down with Grant and Jacinda Ardern and Kelvin Davis to negotiate a coalition, we will remain committed to that framework.

That means we also commit to running surpluses over the economic cycle, reduce Crown debt to 20% of GDP by 2021, manage expenditure prudently, invest for the long term, and tax fairly.

I have some more graphs, prepared by independent economic consultancy Infometrics.

[slide – OBEGAL graph]

This shows that the Green Party will run surpluses.

They’ll be slightly smaller than National’s surpluses, but that’s because we’re serious about investing to solve the big problems our country is facing.

$3.3 billion next year, $5.2 billion the year after, and $6 billion in 2020/21.

The surpluses will be big enough to provide us with a buffer to help solve other problems and/or pay down debt.

[slide – debt]

This shows that we will pay down debt to 20% of GDP.

We’ll do it slightly slower than National, again because we think there are some immediate problems on the table.

But as a journalist said to me last week, there is not a bank economist in the world who seriously thinks debt at 20% of GDP is risky.

[slide – core Crown expenses]

The final fiscal rule we signed up to said we’d keep government spending within its long term average range, which is around 30 percent.

As you can see, we’re well within that range, but we’re higher than National.

[slide – Winston/yes]

Labour and the Greens also committed, together, to measure our success by the outcomes of our policies.

By the number of children we have lifted out of poverty.

By the reduction in our country’s carbon emissions.

And by the swimming holes and rivers that are safe and clean in the summer.

Our fiscal plan is also somewhat aligned with the Labour Party’s.

We will restart payments to the New Zealand Superannuation Fund immediately, and restore health and education funding.

On those things, the Greens and Labour see eye to eye.

So when we sit down to negotiate with them after the election, we can cut right to the chase.

You know whose fiscals don’t align with Labour’s?

You know who hasn’t actually released a fiscal plan?

You know who has made between $10-15 billion dollars’ worth of promises this election, depending on how you add them up, but has not explained how he’s going to pay for any of them?

It’s pretty easy for political leaders to offer inspiration and hope about how they’re going to change the world.

Voters have every right to be sceptical.

You can whole-heartedly believe in the goal, but you may well believe that it is simply not possible to achieve.

Or, you may not believe there is a credible plan about how to achieve it.

Or, you may not believe that someone has the skills and ability to deliver it, even if you think there’s a half-decent plan.

[slide – Green people]

That’s why I’m here this evening, launching our fully costed policy manifesto.

Think of this as a solid business case for where we think New Zealand should be heading, and an independently audited plan to get us there.

A week out from the election, what I’m saying tonight is that this fiscal plan provides the substance that makes the Green Party’s promises 100 percent credible.

It is the combined efforts of a great number of people, within the Greens and from the outside world.

Each member of our caucus has contributed.

It is a credible plan, put together by people with the right skills and experience for the job, and externally costed and verified by economic agencies I trust.

It is, to coin a phrase, change you can believe in.

I look forward to the opportunity to lead the Greens into Government, so we can finally deliver on the promise of a 100% Pure New Zealand.

It’s 100% possible.